Economics and similar, for the sleep-deprived

A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?

Update: seemingly not

Update: Oh yeah!

Thursday, August 04, 2011

And another thing ...

Just to be clear on this, as I think some people are confused.

The bad thing about cutting the federal deficit is not that it might affect Social Security or Medicare. Even if these were totally ringfenced it would be a bad idea.

The bad thing about cutting the federal deficit is not that some other virtuous program might be defunded. Even if all the savings came from military procurement it would be a bad idea.

The bad thing about cutting the federal deficit is not that it "shrinks the state". Even if all the deficit cuts were obtained by tax rises it would still be a bad idea.

The bad thing about cutting the federal deficit is not that the burden falls disproportionately on the poor. Even if the deficit were reduced specifically by taxes which only fell on the top 1% of the income distribution it would still be a bad idea.

The bad thing about cutting the federal deficit is that unemployment is very high and interest rates are very low. Given that, taxing productive activity to pay down debt is really obviously the wrong thing to do, and borrowing money to employ currently unemployed resources is really obviously the right thing to do.

It would not need to be spent on "shovel-ready" projects. By definition, for purposes of expansionary fiscal policy, anything you can spend money on is shovel readly.

It doesn't have to be spent on vital infrastructure. Even completely pointless activity would be better than nothing. In some cases, even actually destructive activity, like war, has had a stimulative effect on the domestic economy.

The basic issue, and the one which ought to have people running around like their hair is on fire, is the unemployment rate. That, combined with the interest rate, shows you that deficit reduction is the stupidest possible policy at the current time. This is a very important issue, and the current President of the USA is on the wrong side of it.37 comments this item posted by the management 8/04/2011 01:35:00 AM